Monthly Archives: June 2010

When it comes to unified communications and collaboration (UCC), HP isn’t ready to bet the house on a single partner. It has struck UC-related partnerships with Microsoft, Avaya, and Alcatel-Lucent, and it also has the capability, through products obtained as a result of its 3Com acquisition, to develop a home-grown alternative.

It isn’t surprising that HP’s channel partners and customers, as well as neutral observers, are confused by HP’s seemingly promiscuous approach to UCC solutions. I’ll try to shed a bit of light on the situation, but I suspect nothing is carved in stone and that HP’s strategy will be subject to change.

Avaya and Alcatel-Lucent struck their deals with HP’s services business, which will act as a system integrator in bundling and delivering solutions to customers. It’s worth noting that HP also has a video-collaboration and UC partnership with Polycom.

HP has decided to play the field for a couple reasons. First, the UCC space remains an underdeveloped market whose best days remain ahead of it. Despite years of hype, unified communicaitons has yet to fulfill its potential. To be fair, the reasons for that underachievement have more to do with industry politics and macroeconomic circumstances than with technological factors. Nonetheless, the market is one that has seemed perpetually on the cusp of better times.

Another reason that HP has cast a wide net with its UCC partnering efforts is that the predilections of the market, both with regard to vendors and architectural approaches, have yet to be revealed. Neither the PBX approach from Avaya and Alcatel-Lucent nor the desktop gambit from Microsoft has been declared a definitive winner. Moreover, the possibility exists that hosted UCC solutions might prove attractive to a significant number of enterprise customers. HP is getting into the game, but it’s spreading its bets across a number of leading contenders until the odds shift and one vendor establishes a clear market advantage.

As for why HP is getting into the game, well, the answer is partly that the company detects improving fortunes for UCC and partly that it feels compelled to respond to Cisco. One thing that HP and all its UCC partners have in common is competition against Cisco. HP needs an enterprise alternative to what Cisco is offering, and these partnerships provide it with various options.

Even though HP focused on the SME space with its latest Microsoft UCC announcement, I can’t see clear horizontal- or vertical-market delineation in HP’s partnering strategy.

Consequently, HP’s technology partners can’t feel overly secure. Any of these deals could fall apart, in real (revenue-generating) terms, without much warning. HP will follow its customers’ money. At the same time, it might be tempted to build or buy its own alternative. Further chapters in this story are sure to written.

I don’t want to spend a lot of time on it, but I’ll offer a relatively brief assessment of Cisco’s Cius enterprise-tablet announcement yesterday.

Look, folks, the Cius is not competing with the iPad for the affections and disposable income of tablet-buying consumers. That’s not Cisco’s game, is not part of Cisco’s plans, and is just not happening. So, as difficult as it might be to do, forget about Apple and the iPad for now. Put it out of your minds. Apple gets more than its share of attention already, and I’m sure we’ll have many other reasons to pay homage to the iPad, the iPhone, and the other iWonders best0wed upon us by the wizards of Cupertino.

Now that we’ve determined what the Cius (as in “see us,” get it?) is not, what exactly is it? For starters, it’s clearly an extension of Cisco’s enterprise videoconferencing and video-collaboration portfolio. Cisco has been working from the high end to the low end, starting with luxury, room-based telepresence, buying its way into a wider range of corporate telepresence and videoconferencing through its Tandberg acquisition, and now developing its own low-end tablet, the Cius, to make enterprise video mobile and to deliver it to desktop docking stations.

So, one way of understanding the Cius is as a means for Cisco to extend telepresence, videoconferencing, and video collaboration to areas of the enterprise it has yet to penetrate. It’s Cisco’s way of making sure video proliferates throughout its customer base, giving Cisco opportunities to derive sales not only from video-based products, but also from the enterprise-network upgrades that inevitably result from widespread utilization of high-bandwidth video on a corporate campus. For Cisco, there’s a revenue multiplier effect that is concomitant with the spread of enterprise video.

Not coincidentally, this move also precludes potential competitive encroachments by competing vendors of low-end videoconferencing and video-collaboration products. Cisco had a hole at the low end of its video product portfolio, and it has closed it with this announcement.

With the Cius, Cisco also integrates its enterprise-wide video-collaboration tributaries with its preexisting IP phone, unified communications (UC), and data-collaboration (as in WebEx) product streams. The docking station that comes with the Cius isn’t just an ornamental device holder; it is intended to act as the physical point of integration between personal video-collaboration and Cisco IP phones. Competitors cut off at the pass here include Microsoft, HP, Avaya, and scores of others.

Finally — and Cisco’s reach might exceed its grasp on this one — the networking giant would like enterprises to view the Cius as an office-computer replacement. In defense of that argument, Cisco cites the Cius’ notebook-caliber Atom chip, its capacity to accommodate a monitor and keyboard, and its support for virtualization. I think Cisco has to put more meat on these skeletal bones, but I can see where they’d like to go and why. Again, Microsoft is a big target. It will be interesting to see how closely Cisco and Google, whose Android OS runs the Cius, can work together to disrupt their common foe.

All in all, the Cius was a logical move for Cisco, a practical and broad-based extension of its video-collaboration strategy. Apple, though, isn’t in this particular picture.

A blog post earlier today by David Drummond, Google’s SVP of corporate development and chief legal officer (CLO), seems to have engendered some confusion in certain media circles. I am here to elucidate.

Titled “An Update on China,” the relatively brief blog post explains why and how Google will attempt “a new approach” to the delivery of search results to Chinese users.

Google is considering this new approach because China has forced its hand. As Drummond explains:

We currently automatically redirect everyone using Google.cn to Google.com.hk, our Hong Kong search engine. This redirect, which offers unfiltered search in simplified Chinese, has been working well for our users and for Google. However, it’s clear from conversations we have had with Chinese government officials that they find the redirect unacceptable—and that if we continue redirecting users our Internet Content Provider license will not be renewed (it’s up for renewal on June 30). Without an ICP license, we can’t operate a commercial website like Google.cn—so Google would effectively go dark in China.

Okay, got that? After Google and China exchanged unpleasantries over Chinese hacks and theft of Google intellectual property, Google relocated its search servers from China to Hong Kong. Chinese users who visited Google.cn automatically were redirected to the Google.com.hk. Ostensibly this approach enabled Google to avoid having to provide filtered (as in censored) search results to its Chinese users. However, as I’ve mentioned before, the Google-China conflict wasn’t primarily about censorship, notwithstanding Google’s protestations to the contrary.

Just to recap, if I may speak freely, Google eventually came to believe that the China market was fixed, rigged in favor of China’s Internet players, including Baidu (more on which later). It wasn’t a fanciful deduction. Google had been subject to hacking, IP theft, aggressive state-sponsored corporate espionage, and an official government policy of “indigenous innovation” that actively promotes the interests of Chinese companies over those of foreign rivals. All the while, of course, those foreign companies are invited by the Chinese government to do business in China, primarily so that their IP and trade secrets can be transferred to Chinese firms.

Anyway, getting back to Google’s blog post of earlier today, let’s consider the “new approach” Google is implementing in place of the automatic redirect from China to Hong Kong. What Google will do now — and it already works from North America — is provide a landing page at google.cn, from which Chinese visitors can click on a link that will take them to Google’s Hong Kong site (google.com.hk).

Incredibly, CNN, among others, is portraying this move as some sort of capitulation. Nothing could be further from the truth. In the face of official China’s strong disapproval of the automatic-redirect approach, Google has chosen to make the redirect manual, requiring that users merely click once before arriving at the Hong Kong search site. It’s a cheekily clever attempt to circumvent China’s restrictions while adding just one step to the process of Chinese visitors availing themselves of Google’s Chinese-language services. Nothing substantive has changed, and Google has made no meaningful concession.

Obviously, China will see right through the maneuver. Google not only instituted “a new approach” that isn’t really a new approach at all, but it irreverently announced it — in a public blog post, no less — to the entire world. Google has thrown down the gauntlet, and raised a middle finger for good measure. I don’t see how Google expects China to do anything other than reject its resubmitted application for an ICP license.

Meanwhile, we have news from Baidu (I told you I’d come back to them). Starting next month, Baidu will be hiring 30 “mid-to senior-level software engineers from Silicon Valley at a job fair on July 10 to drive new technology projects, its first direct hiring from the United States,” according to a Reuters report.

If Google won’t bring talent and trade secrets to Baidu in China, then Baidu will have go to California to get them.

Notwithstanding utility executives’ apparent contrition and ostensible commitment to institutional reform, I remain unconvinced that they have seen the light. I still think they require further reprogramming, a service that disaffected consumers will be only too happy to provide.

As I read through LaMonica’s piece, I noticed the absence of a very important word. The utility executives, despite their recitation of anodyne platitudes, could not bring themselves to say the word, though they ventured occasionally into its outlying neighborhood.

That word? Savings.

Although the article featured many instances of utility bosses talking about getting consumers onboard, getting consumers involved, and treating ratepayers as customers, there was no specific mention of passing significant, quantifiable savings to smart-meter-equipped residential consumers.

Jim Rogers, CEO of Duke Energy, came closest to striking gold. He said consumers will want better ways to manage and reduce their energy use for economic reasons. But he should have gone further .

All the utilities should and must go further. It’s well understood how smart meters, dynamic time-of-use (TOU) pricing, and demand-response programs can help utilities reach their business objectives and regulatory mandates. What’s less clear is exactly what consumers will get from the deal.

It’s too late in game for the utilities to be using nebulous niceties and vague concepts to sell consumers on smart meters and the smart grid. Now is the time for utilities to cut consumers a pice of the action. It’s time to incentivize the consumer with hard ROI numbers and compelling savings. Don’t dance around the consumer benefits; spell them out.

Utilities say they want to treat their consumer ratepayers as customers. Well, customers don’t buy products or services unless they perceive value in doing so. Utility executives seem to realize that what they’re peddling doesn’t have the raw sex appeal of an iPhone or an iPad. Consequently, they should recognize that the value they offer to consumers must include a strong monetary dimension.

It’s long past time for utilities to get specific about the tangible benefits, including savings, that consumers can derive from smart meters. If the smart grid is to result in something more than efficiency and operational savings from upgrades to transmission lines and distribution automation (DA) facilities, consumers must have good reason to play their part in making it happen.

HP’s message was one of coherence and symmetry. You can see where it’s going and how these product announcements — which brought HP up to speed with its competitors in some areas (rack-mount and blade servers) and arguably ahead in others (simplified application provisioning and server energy-effiency management) — advance the company, and perhaps some of its customers, toward an all-HP converged data center.

Still, HP hasn’t delivered a knockout punch, with this announcement or any that preceded it. Instead, it has fleshed out a narrative, telling a better story as it goes along. Gaps remain, especially in networking, where HP has yet to fully integrate 3Com and its product portfolio into its grand scheme for converged infrastructure. That story will come, I’m sure.

A bigger concern, though, is whether customers will buy what HP is selling. Early indications suggest customers are understandably wary about getting boxed into HP’s self-contained world of converged servers, storage, networking, management tools.

HP will cavil here, protesting that what it offers isn’t proprietary. It will say, as it does, that HP’s converged infrastructure is built on open standards, and that customers “can change out whatever they like.”

Well, HP is being disingenuous. It knows that’s not entirely true, and so do savvy customers.

Yes, much of HP’s hardware products are based on industry standards that make them functionally interoperable with gear from other vendors. That said, HP includes proprietary management software with its servers and storage boxes that feature special hooks for optimized performance on HP systems. Once customers buy into HP’s infrastructure-management software — for application provisioning, automation, energy efficiency, and so forth — HP hopes they’ll be disinclined to accept any potential performance trade-offs inherent in a mixed-vendor environment.

HP’s challenge, then, is to convince customers that the value inherent in its converged infrastructure is sufficiently attractive to compensate for the perceived or real cost of proprietary lock-in. HP must show that it has a sustainable edge, that it will continue to innovate, that its approach really does deliver compelling ROI and superior cost savings from all that automation, simplification, and — yes — convergence.

It’s a daunting challenge. Customers and resellers aren’t certain they want to take the ride. The former have products and systems that already work from vendors with which they’re comfortable, and many of the latter aren’t sure they want to bet the farm on HP.

For HP, conceiving and articulating the big-picture vision for converged infrastructure was the easy part. Getting the rest of the world to buy into the master plan will involve a lot of hard work. It’s too early to render a definitive verdict, but HP might have to reconcile itself to a world in which customers continue to subscribe to the vendor diversity and system interoperability HP claims to espouse.

Readers with an abiding interest in the smart grid might wish to check out a piece I wrote for GigaOM Pro (subscription required) on Cisco’s foray into ruggedized networking gear for utility substations.

In that post, I examine the market opportunity, the competitive landscape, Cisco’s strengths and weaknesses in the space, and some of the challenges the networking giant will have to meet as its seeks to extend its hegemony into what should be a natural “market adjacency.”

Boudreau correctly notes that labor costs are rising in the coastal region where most of China’s electronics and technology products are manufactured. At some point, those rising costs will result in decreased margins for product vendors or in higher prices for consumers and businesses that buy products from those vendors.

It’s also true that contract manufacturers operating in China’s main manufacturing hub will begin or have begun exploring alternative arrangements. Options include setting up factories further inland, in China’s less-developed interior, or shifting some types of manufacturing to automated facilities in Taiwan or to other low-wage countries, such as Thailand or Vietnam.

But those moves will not happen overnight. We should recognize that, even though the cost of Chinese labor is increasing, it’s still low. What’s more, China offers other advantages — such as a ready supply chain and access to plentiful raw materials (such as rare-earth metals essential to the manufacture of many kinds of technology hardware). Additionally, China still has that low-cost interior mentioned above, where there’s more than enough labor available to provide a helping hand.

Let’s also consider the appreciation of the Chinese yuan, also known as the renminbi. China’s authorities are allowing the currency to appreciate relative to the dollar, but the yuan won’t be allowed to skyrocket. China is not a so-called “invisible hand” market-based economy; its government retains firm control over the trading range of the country’s currency. Don’t expect a dramatic rise in the near-term valuation of the renminbi to the dollar. It’s not going to happen. Instead, advances and declines will be controlled, incremental, and measured.

Finally, there’s the question of whether, and to what degree, increased Chinese wages might result in more consumer spending on imports from the U.S. and other countries. The assumption is that Chinese workers who assemble and build Apple iPhones and iPads — not to mention HP and Dell PCs — now will be able to buy them, too.

To a degree that might happen, but bear in mind that China wants to move up the technology industry’s value chain. China won’t be happy functioning merely as foundry and consumer market for Western brands. China’s long-term objective is to architect and develop major technology companies of its own, Lenovo and Huawei being notable examples.

Those familiar with the term “indigenous innovation” know that Chinese companies will receive government support and encouragement as they increasingly compete against major Western companies across China’s technology landscape. We in the West need to exercise caution in assuming that China’s consumer market will function similarly to its counterparts in market-based economies. Not only does China’s government actively assist domestic companies — often through direct or indirect state control — but many Chinese consumers will actively and purposefully purchase goods and services from Chinese companies instead of those offered by Western companies.

What we’re seeing in these developments — the rising labor costs, the gradually unpegging of the yuan to the dollar, the country’s desire to ascend the technology value chain — are signs of a growing, maturing economic and industrial powerhouse. I don’t think they should be construed as symptoms of Chinese volatility or weakness.